The Foreign Exchange market has its own terminology which is normally used by all Forex brokers, investors and traders. Here is a brief list of the frequently used Forex terms and their meanings. Also besides terms, we provide you beneficial Hints For Forex Trading as well.
Ask Price/ Offer Price
The ask and offer price is the price at which the market is ready to trade a specific currency. This is the price where, an investor can purchase the base currency. When seeing a quote, it is located on the right side. For example, in the quote EUR/USD 1.4547/52, the ask price is 1.4552.
Base currency
The currency listed first in a Currency Pair is known as the Base currency
Bids
A Bid is the price at which the investor is willing to purchase a currency.
Bid/Ask Spread
Simply stating, Bid/Ask spread is the variation between the bid and offer price. It can also be defined as the degree of difference in pips, amid the buying price and the selling price of a currency pair.
Broker
A person or an organization acting as an agent, putting together buyers and sellers for a commission or fee, can be defined as a Broker. They are the ones who work on behalf of their investors.
Counter Currency
The currency listed second in a Currency Pair is known as the Counter currency.
Currency symbols
EUR - Euro
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
JPY - Japanese Yen
GBP - British Pound
Day Trading
Day trading refers to the buying and selling of positions within a single day’s trade.
Foreign Exchange
Also known as Forex or FX, it is the process of buying of one currency in exchange of other currency in an over-the-counter market
Leverage
Leverage is the ratio of the deposited amount to the amount that can be traded. Find out Importance of Forex Leverage
Limit order
Limit orders let the Forex investors stop further trading and leave the market at preset profit objectives. It is an order which restricts the greatest price to be paid or the lowest price to be received.
Liquidity
Liquidity can be defined as the capacity of a market to allow fat transaction with negligible impact on the price stability.
Margin
Margin is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
Pip / Point
When dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%. A pip can also be defined as the smallest value at which an exchange of currency can take place.
Stop Loss Order
Stop/loss commands allow the investors to set an exit point for a loss. By limiting your losses to a pre set position, Stop/loss orders help investors control their risk conditions. 'Stop-loss' can lower an investor's exposure to risk by a large proportion.
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